Questions to ask a Business Seller
In a previous article called Questions to ask when buying a business I looked at one question to answer before you start buying a business and then ten questions to ask the seller.
Buying a business is tough. To show how tough it is, what do you think is the answer to the following question?
What percent of people in the United States own a privately-held business?
The answer will surprise you? The exact number is not known as it’s not an easy statistic to collect. However, according to the US Bureau of Statistics approximately 1% to 2% of the United States population owns a privately held business.
There is no question that owning and operating a privately held business is tough; as I said earlier. It’s even tougher trying to find the right business to buy and moving through the buying process as there as so many pieces to navigate.
To help you do this successfully, here are another 12 questions to ask a business seller.
- What are the licenses, permits or any unusual conditions or restrictions the business requires to run successfully? This includes both government agencies including police, fire department, health and non-government agencies and are any of these a personal requirement of the owner of the business?
- Are there any special requirements or covenants in the lease?
- What has been the sellers experience with both neighboring businesses and the residential neighborhood where the business resides?
- Does the business comply with the handicapped laws (that is, ADA or American Disabilities Act), and if not what are the requirements to comply? When was the last time you had a third-party audit?
- Why does the seller want to sell?
- Are all sales shown on the tax returns of the business?
- Are the employees part of a union, and if so, which union? If they are not part of a union, what are the chances of the workers organizing to have a union?
- Who and how many vendors service your business, how often do they make deliveries, and how do you make sure they are competitive?
- What are the hours of the operation of the business and how do you know if they are meeting the needs of the customers?
- Who is responsible for paying for the utilities and are there separate meters for electric, gas, and water?
- Who are your nearest competitors and has this changed over the last 3 years?
- Describe your customers, what percent of your customers are regular customers and do you have any customers that make up more than 10% of the annual sales of the business?
If you are looking to buy a business, at its most simple level, buying a business is all about managing your risk.
Managing your risk and getting it right is about asking good questions, making sure you get an answer that makes sense and backing your instincts to feel comfortable with the seller. It’s also about asking people you know and trust to get their perspective and feedback so it adds another layer of protection to your decision making process.
If you have questions on the steps to buy an existing business or franchise, feel free to get in touch today for a consult, and together we’ll talk about your goals. We’ll discuss what’s important to you and why and the options available to you.